4 Casino Stocks To Bet On Ahead Of Q4 Earnings

The U.S. gaming industry has been on a strong growth trajectory for over a year now. According to our Zacks Industry Rank, the Gaming industry has gained more than 32.9% in the past year, outpacing the S&P 500’s 23.8%.

Within the gaming space, the casino market, which is considered one of the largest entertainment markets in the world, is positioned for substantial growth over the long haul. Per a report by Research and Markets, the casino gaming market in the United States is expected to see a compound annual growth rate (CAGR) of 4.74% in the 2017-2021 period.

What’s Working in Favor of Casinos?

The stellar rally of casino stocks on the bourses has been supported by an array of factors. First, demand in the casino space is relatively inelastic as the business targets a fixed range of consumers. These consumers will continue to demand services at casinos irrespective of market conditions. Moreover, a rising middle-class population with increased spending on leisure is helping the gambling market flourish.

Second, lenient government regulations with respect to online casinos have led to a rapid rise of casino operators. Online gambling has been a primary growth driver for the market as a wide range of customers has gained access to such portals.

Finally, improving dynamics of the tourism industry is favoring casino companies. Tourism in Las Vegas is looking up on a consistent increase in traffic. Revenues at companies operating in Las Vegas are also likely to grow.

Moreover, the turnaround in Macau business is helping the companies rake in handsome profits. Although a tough operating environment in Macau weighed on casino stocks from June 2014 to most part of 2016, revenues have been rising since the second half of 2016 with new resorts attracting high rollers as well as leisure gamblers.

Meanwhile, efforts undertaken by Macau operators to revive revenues by attracting tourists with numerous facilities have also started yielding results. In fact, in the first 11 months of 2017, gambling revenues from Macau rose 19.5%, signaling recovery in the casino hub. Macau’s momentum has also been hitting highs lately, giving investors enough reasons to be bullish in the quarters ahead.

Casino Giants Opt for Alternative Avenues

Leading casino companies are primarily looking up on improving tourism in Las Vegas and increasing demand for gaming and leisure. These casinos are opting for alternative avenues to expand customer base and business. They are increasingly making associations with the hospitality sector, setting up luxury hotels alongside their gaming businesses. Since these non-gaming services generate higher margins, companies are increasingly focusing on alternative streams to drive revenues.

Casino giants are also effectively responding to the rapidly evolving market and are capitalizing on significant cash flow associated with the current casino business.

Picking the Right Stocks

We have taken help of the Zacks Stock Screener to zero in on casino stocks that have a Zacks Rank #1 (Strong Buy) or #2 (Buy) and other relevant metrics. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let’s take a closer look at each of these stocks.

Wynn Resorts, Ltd. (NASDAQ:WYNN) , with a market capitalization of $16.96 billion, has exhibited impressive price performance over the past year. Shares of the company have rallied 90.9%, outperforming the industry’s gain of 32.9%.

Moreover, upward revision in earnings estimates for the quarter to be reported and 2018 reflects analysts’ unwavering confidence in the company. Over the past two months, fourth quarter and 2018 earnings estimates inched up 2.3% and 4%, respectively. The company also delivered positive earnings surprises in three of the trailing four quarters, the average beat being 15.4%.

We also note that fourth-quarter earnings estimates are pegged at $1.34, reflecting 168% year-over -year growth. For 2018, earnings growth is projected at 24.3%.

Moreover, per our VGM Score, which identifies the most attractive value, growth and momentum characteristics, Wynn Resorts holds a Growth Score of A. This reflects robust growth potential of this Zacks Rank #1 stock. The company is expected to release fourth-quarter results on Jan 25.

Penn National Gaming, Inc. (NASDAQ:PENN) , carrying a Zacks Rank #1, has rallied 150.8% in the past year, steering past the industry mark. The stock’s potential is reflected in its Value Score of A. Over the past two months, although earnings estimates for the fourth quarter remained unchanged, the same for 2018 moved up 3%. Penn has proven its ability to consistently grow revenues and maintain share price momentum. Earnings estimates for the quarter to be reported are pegged at 18 cents, reflecting a 260% increase from the year-ago level.

Its fourth-quarter results are expected to be released on Feb 1.

Melco Resorts & Entertainment Ltd. (NASDAQ:MLCO) , with fourth-quarter earnings release expected on Feb 15, has shown decent price appreciation over the past year. The stock has gained 73.3%, outperforming its industry.

Although fourth-quarter estimate revisions have remained stable, earnings estimates for 2018 have inched up 2.9% over the past 60 days. Estimates for 2018 project earnings growth of 19.8%, while that for the fourth quarter is pegged at growth of 76.9%. The company also delivered positive earnings surprises in three of the trailing four quarters, the average beat being 61.2%.

Melco carries a Zacks Rank #2, with Growth and Momentum Score of B. This not only reflects the company’s growth potential but also makes the stock a lucrative pick.

Las Vegas Sands Corp. (NYSE:LVS) , being a distinguished developer, owner and operator of casino resorts, has solid business fundamentals. Shares of the company have gained 18.8% in the past six months, outperforming the industry.

Over the past two months, the company’s fourth-quarter and 2018 earnings estimates have gone up 2.7% and 3.4%, respectively, reflecting analyst confidence. The estimate for fourth-quarter earnings, which is pegged at 77 cents, reflects year-over-year growth of 24.2%. Earnings in 2018 are estimated to grow 6.1%. The company also delivered positive earnings surprises in three of the trailing four quarters, the average beat being 9.1%.

Las Vegas Sands, along with a Zacks Rank #2, has a Growth Score of B. Also, the company’s Momentum Score of B indicates that it is the right time to invest in the stock.

The company is slated to release fourth-quarter results on Feb 1.

Zacks Top 10 Stocks for 2018

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?

Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp (NYSE:FMC). and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2018 today >>